“Apple reportedly has reached deals to lower its card transaction fees with five of the largest financial institutions in the nation as part of the Silicon Valley giant’s to-be-launched payments venture,” Ian Kar reports for Bank Innovation. “The financial institutions are American Express, JP Morgan Chase, Citigroup, Capital One, and Bank of America.”

“The first thing Apple has done is convince these [five] FIs to consider transactions from Apple’s upcoming payments venture — said to launch with its forthcoming iPhone 6 introduction — as ‘card present’ transactions, which carry a lower discount rate than ‘card not present’ transactions, because of lower fraud risk,” Kar reports. “Beyond that, Apple has also managed to bump down the actual ‘card present’ rate by 15 to 25 basis points, according to people with knowledge of the talks. Normal ‘card present’ discount rates, which are shared by issuers and networks but determined by the network, are about 1.5%, which means that Apple appears as though it will get around a 10% discount on the processing rate it will pay.”

“Apple was apparently adamant about getting the card-present rates and told issuers that it would assume some of the fraud risk inherent in every transaction by providing a secure element via biometric authentication (its TouchID feature) and location data provided through an NFC chip. The Apple payments platform will work with all of their cards,” Kar reports. “Banks offered the discounted fee for two reasons: for the Apple payments platform to accept all of the cards from the issuers, and for Apple to assume some of the liability by including two secure elements that will authenticate transactions — location data via the NFC chip, and biometric security. This is essentially a wash for the financial services industry: they lowered fees for Apple for the privilege of being included in Apple’s payments initiative, but managed to put some of the transaction risk to Apple.”

Anyone who has worked with credit card companies in building commerce sites and mobile payments knows this article is sensationalizing. Apple didn’t get deep discounts, rather Apple has preliminary been set at one if the established tiers that is favorable vs other mobile payments. If actual behavior of Apple’s customers differs from that tier then the rates will go up. Apple has been given the benefit of doubt here, which is truly amazing for them given banks have all the power. But no need to make up false headlines.

It would appear that Apple is soon to be a player in the financial transaction field. Secure transactions have great appeal to both banks and consumers. Looking down the road, wearable devices could expand a modest, U.S.-based initiative into something quite significant.

I’m not sure what will come of all this good news in the long-term but I suspect that Wall Street will pretty much gloss over it and Apple’s share price will remain range-bound over the next few months. Apple seems to be making preparations so everything falls into place at once with mobile payments and I’m looking forward to using an iPhone to do mobile transactions. It would seem as though Apple has an advantage over Android for mobile payments thanks to Touch ID and advance partners but maybe it’s just my wishful thinking. If consumers like the idea of using a smartphone to make mobile payments it should certainly help sell the newest iPhones and/or wearable devices equipped with an NFC chip.

It’s unfortunate that mobile payments aren’t going to boost Apple’s share price all that much but I suppose Apple’s current wealth simply makes any revenue boost appear tiny in a relative sense.